Monsanto Company (MON): Share price cycles in bullish 'flag'

Posted Mar 28th 2008 2:50PM by Larry Schutts
Filed under: Earnings Reports, Technical Analysis, Stocks to Buy

Monsanto Company (NYSE: MON) provides agricultural products to farmers worldwide. The company produces seeds and develops biotechnology traits that assist farmers in controlling insects and weeds. Products include canola, corn, soybean, fruit, cotton, sunflower and sorghum seed. Monsanto also manufactures the world's leading herbicide, Roundup. Further, it provides products that focus on improving dairy cow productivity and it sells genetics lines for improving the productivity and meat quality of swine.

The company pleased investors earlier in the week, when it issued upside earnings guidance. Management predicted Q2 EPS "in the range of $1.75", versus Street consensus of $1.35. It also said it was looking for FY08 EPS in the range $3.15-$3.25, versus consensus of $2.87. The brighter views were attributed to leading corn market share positions, accelerated biotechnology trait penetration and new value generated by Roundup and other glyphosate-based herbicides.

The stock popped through 30-day, 50-day and 90-day moving average resistance on the news and has since been consolidating the gain in a bullish "flag" pattern. Equities frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the shares with four "strong buys", seven "buys", four "holds" and two "sells". Analysts see a 37% average annual growth rate, through the next five years. The MON Sales Growth rate (36.39%), EPS Growth rate (187.50%), Operating Margin (18.00%) and Net Profit Margin (12.11%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 85% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $53.95 and $129.28. A stop-loss of $99.50 looks good here. Note that the firm is expected to report Q2 results on April 2nd, before the open.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.

Tags: flag, fundamental analysis, FundamentalAnalysis, momentum, MON, Monsanto Company, MonsantoCompany, technical analysis, TechnicalAnalysis